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The body said today that colleges spend around £180 million a year on administrating funding, qualification and assurance systems. This amounts to £150 per student.

Amyas Morse, head of the NAO, said that “substantial savings can be made by reducing bureaucracy in further education, and demonstrate the need for focused and systematic management of these costs to drive sustained improvements in efficiency”.

But the NAO said that the Department for Business, Innovation and Skills had “not yet measured the size of this burden on further education colleges and other providers” despite recognising that some administration is unnecessary.

“The department lacks a complete picture of its final operating model for the funding, qualification and assurance system, supported by a detailed plan of how to get there.

“Nor does it know how much the new system will cost or the impact of the reductions proposed,” the NAO explained.

“There are various initiatives underway but they are not well coordinated and further education colleges and other providers, although welcoming the changes, do not have confidence that the simplification of the system of administration will be sustained.”

The quango said it had developed a number of ways to simplify administration with BIS, and that “clear, ambitious” targets were now needed to save money.

“The department and the Skills Funding Agency have the ambition to make changes to simplify the system, but they must get to grips with the issues we have raised in order to achieve value for money and prevent colleges being embroiled in red tape,” Mr Morse said.